Tech Smart: In short supply

March 21, 2012
Noah Levine
Issue 4

Electronic gadgets and all manner of cutting edge technologies are embraced in Japan in a way not really equaled anywhere else around the planet. The country is known for being a few years (or sometimes decades) ahead of the planet in how they’re using their electronics, and many of the world’s leading manufacturers are Japanese companies with at least some production based in their home country.

Electronic gadgets and all manner of cutting edge technologies are embraced in Japan in a way not really equaled anywhere else around the planet. The country is known for being a few years (or sometimes decades) ahead of the planet in how they’re using their electronics, and many of the world’s leading manufacturers are Japanese companies with at least some production based in their home country.

The loss of lives and the toll the massive earthquake and tsunami that hit the country in March took on the country’s people and infrastructure were certainly the primary concerns of a shocked world. Rescue and recovery efforts were quickly in place and the world spent a week or so watching in amazement at both the amount of devastation and the way the technologically equipped Japanese people were able to document and broadcast it. Of course the nuclear disaster at the quake-sticken Fukushima Daiichi also kept the world focused on Japan with the tension of a possible meltdown grabbing headlines and becoming a regular presence in cable news scrolls.

Now Japan is quickly moving from rescue and recovery mode toward rebuilding and an eventual return to normal. However, the impact of a natural disaster this size will be felt for some time and in numerous ways. One of those ways will be how the interruptions at Japanese technology manufacturing facilities will impact supplies, shipments and possibly even the development of consumer technologies including computers, digital cameras, cell phones and of course the smartphones that are really all three of those in one.

Supply-side impacts

Just days after the disaster, the electronics supply analysts at IHS iSuppli began issuing reports on the status of manufacturing facilities in Japan. The reports look beyond the finished products to their components and even raw materials used in those components. While iSuppli reported on a range of manufacturing disruptions, the firm predicted few imminent shortages due to large stockpiles of some materials and alternative production sites for many components.

Still, the impact won’t be a small one. Probably the largest effect comes in the area of semiconductors and the silicon wafers used to produce them. Immediately after the quake the plants that produce 25% of the world’s silicon wafers were offline. With semicondutors being a foundation of just about every technology, and the factories that shut down specifically fabricating wafers for use in flash memory chips, iSuppli said flash memory shortages were possible and a spike in orders followed. However, the companies hardest hit by the quake were able to shift some production elsewhere and production of flash memory is expected to meet demand this year, even as that demand and production capacity continue to grow.

Other shortages caused by the quake include the manufacture of CMOS and CCD imaging sensors for cell phones as well as the sensors for higher end DSLR cameras which are reportedly in short supply for the time being. Additionally large LCD screens for televisions as well as digital compasses used in Apple’s iPad 2 have also faced production difficulties and shortages. In fact Apple seems to be one of the company’s most deeply affected, as the popular iPads make use of numerous components produced in Japan.

Supply of the company’s second generation tablet aren’t keeping up with demand and iSuppli recently downgraded their prediction for how many units the company would ship this year by 9%. Of course that still has the company moving almost 40 million tablets, an 163% increase over the 15 million they shipped in 2010. According to iSuppli, Apple avoided a far more severe supply impact by quickly securing alternate sources for impacted components in the quake’s aftermath, even if that meant paying higher prices and upsetting competitors.

“Apple’s fast action to lock up much of the available capacity of the leading component suppliers has left many competitors scrambling for needed components, particularly touch screens,” reported iSuppli.

Shelves far from bare

But just as Apple was able to scramble to secure supply lines for the parts it needs to meet the continuously growing demand for its gadgets, other companies will surely find ways to get what they need to build their latest attempts to create and sell millions of whatever the next must have device happens to be.

Sure they may run up against some constraints, whether quake-related or due to some other factor. But when the parts are being put together to form a gadget of the moment, supply never quite keeps up with demand, and that’s probably by design as a way to continue stoking that demand.

Apple’s quick action was about saving some of an already healthy profit margin, and the fact the company was ready to make such moves so quickly shows just how fluid and truly global the electronics industry is today. There are certainly going to be some items in shorter supply than planned, but the high tech world moves quickly and in most cases alternatives can be procured when they are needed.

Japan is still just beginning the process of recovering from one of the biggest natural disasters to hit a first world nation in quite some time. The full impact of the quake and tsunami will continue to be felt and realized for many years, but Japan is far better off than many less affluent and developed countries that have suffered through disasters of a similar scale.

The event did show that while a massive natural disaster can have a great impact on first world industries such as electronics, the industry is mobile and global enough to withstand such an impact with consumers possibly not noticing or feeling the effects in any real way.